Is there an excuse for this? If you are in the lowest 20% income level, perhaps, but 45-50% of Americans?
For the majority of Americans the problem is not income. It’s spending, the accumulation of stuff, the inability to say no or simply the urge to keep up with Mr and Mrs Jones.
Saving for something thirty years in the future is incomprehensible, something for someday, something we have plenty of time to deal with.
How many Americans understand the value of compounding – over decades? 😰
Bankrate.com
- The percentage of workers who think they’re behind on their retirement savings has remained relatively unchanged since 2022. 56% of American workers feel behind where they think they should be on their retirement savings, including 37% who feel “significantly behind.” Only 16% say they feel they are ahead of where they should be, including 6% who feel “significantly ahead.” 21% feel right on track. In September 2022, 55% of American workers said they felt behind and 35% felt “significantly behind.”
- Around one-quarter of workers haven’t made retirement contributions in at least a year. 22% of American workers said they weren’t making retirement contributions in 2023 or 2022. 25% say they are contributing more to their retirement savings than they have since August 2022. 36% say they are contributing around the same amount as last year and 17% said they are contributing less.
- Workers’ ideal retirement fund can reach seven figures. 32% of U.S. workers say they would need more than $1 million in retirement funds to retire comfortably.
- The slim majority of workers believe it’s likely they’ll be able to save enough to retire comfortably. 52% of American workers say it’s likely they’ll be able to save enough to retire comfortably. 45% think it’s unlikely they’ll have enough to retire comfortably and 3% don’t know.
QUINNSCOMMENTARY 
I don’t put a lot of stock in surveys that depend on responses of “I believe” or “I feel” but it could indicate a problem.
I quickly looked at bls.gov figures and they indicated that as of March 2022 only 69% of private sector workers had accessed to a retirement plan and 73% participated. This is defined contribution. From that I conclude we’re behind the curve in providing retirement savings opportunities for all workers. The numbers for state and local government workers showed they were primarily provided pension access with many having defined contribution access also.
Back to what I was saying about retirement access for all workers, we need to have 100% access to low cost retirement savings plans for all workers with plain language information packets and frequent enrollment opportunities. People aren’t born knowing this stuff and we pretend they are.
I feel for younger workers with the cost of rent or mortgages and the overall cost of living and the need for accumulating retirement savings.
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I agree we need one universal retirement plan everyone can use, we don’t need the confused state of plans and regulations we do have. However, not having an employer based plan does not stop retirement savings. Savings can easily be automated. Education and simplicity are key though.
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“For the majority of Americans the problem is not income. It’s spending, the accumulation of stuff, the inability to say no or simply the urge to keep up with Mr and Mrs Jones.
But money makes the world go round…
“If for some reason consumer confidence declines, consumers become less certain about their financial prospects, and they begin to spend less money; this in turn affects businesses as they begin to experience a decrease in sales. If consumer spending continues to decline and businesses begin to cut back on production, the economy experiences a slowdown and may eventually enter a recession.”
And there goes your compounding.
I don’t know what type of business you were in, but if everyone were as frugal as you (not that there’s anything wrong with that.) You might have gone out of business.
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Not to beat a dead horse, but inequality actually can be a problem.
https://www.epi.org/publication/inequalitys-drag-on-aggregate-demand/
“What this report finds: Rising inequality has had serious economic and fiscal effects. Key among them: It has hurt economic growth. By 2018, the rise in income inequality since 1979 was reducing growth in aggregate demand by about 1.5% of GDP. Rising inequality constrains overall economic growth by reducing economywide spending: Spending falls as inequality redistributes income from lower-income households (that need to spend more of their income to meet living expenses) to higher-income families (that have the luxury to save money).”
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Does that really sound logical to you? The growth in income (actually wealthy not income) for the super wealthy comes from investment, rising stock value. It’s not a limited pie, it doesn’t take income or wealth from lower income families, it creates new income or wealth. My wealth such as it is as grown by 50% in the last 14 years. That happened because of investments and real estate equity and now in the last year it has declined.
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Frugality or loss of income has the same effect. In 2009, Schwarzenegger furloughed California state employees two days per month, a ten percent loss in take home pay. Not only did many employees lose homes, cars, etc., Sacramento businesses took a huge hit, many restaurants and small businesses were out permanently. One persons “inability to say no” is another persons livelihood.
And now, apparently, the plan to reduce the deficit relies almost exclusively on discretionary spending, i.e., transfer payments to the poorest among us, as if their loss won’t affect thousands of businesses small and large. Recession, in other words.
I don’t give a hoot about the super wealthy. When I say inequality I’m thinking about those who work full time or more can’t support themselves, let alone a family.
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A 10% loss of income should not have that impact. They should have been saving 10% or more. Three years after i retired my former employer said there was a mistake in my pension. Not only was it cut by 10%, but three years retroactively. On an after tax basis i survived, but i had a cushion in income vs spending. The lower 20% is one matter. Everyone else quite another
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” The growth in income (actually wealthy not income) for the super wealthy comes from investment, rising stock value. It’s not a limited pie, it doesn’t take income or wealth from lower income families, it creates new income or wealth.”
Where do you think those rising stock values come from? The pie is not un-limited. Workers at the bottom are often not paid enough to survive, but they have no choice. Good for the stockholders, but it’s not sustainable.
“Inequality’s drag on aggregate demand
The macroeconomic and fiscal effects of rising income shares of the rich”…
linked above, as many similar studies, marks 1980, or ” the late seventies” as the beginning of the great increase in inequality. In the U.S., but not in most developed countries. What happened in the U.S.? Trickle down theory. Supply side (Voodoo) economics.
Demand is important also.
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“A 10% loss of income should not have that impact. They should have been saving 10% or more.”
Some of them probably were, in addition to the ten percent automatically deducted pension contribution. Quite a few other full time state workers are actually on various forms of welfare.
But we can’t really base economic assumptions on what people “should” have done.
And…
Seriously, what would happen to the macro economy if everyone tomorrow, began saving (as in, not spending) ten percent of their income?
Aggregate demand is important.
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We have a long way to go when spending declines to that point. In any case, if saving increased and immediate spending declined I think that means more spending in later years, in retirement a redistribution of when spending occurs.
I am not overly frugal, I just don’t spend what I don’t have and in my 80 years never paid a penny in credit card interest.
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